Global financial markets concluded the week with a mixed performance, reflecting shifts in investor sentiment influenced by monetary policy expectations and evolving geopolitical landscapes. While the U.S. dollar found stability after a multi-day decline, safe-haven assets like gold experienced a notable sell-off, signaling a reduction in risk aversion. Concurrently, crude oil benchmarks posted significant weekly losses, despite modest daily gains, as the market recalibrated its assessment of Middle Eastern tensions.
Currency Market Dynamics
The WSJ Dollar Index registered a marginal gain of 0.03%, closing at 94.40 points. This marked a notable reversal, breaking a four-day consecutive losing streak for the currency. Despite this daily rebound, the dollar recorded a weekly decline of 1.23%, its most substantial weekly retreat since May. Year-to-date, the index is down 8.13%, and it has depreciated by 6.06% compared to its level a year ago. Currently, it stands 8.88% below its 52-week high observed in January.
Looking ahead, analysis from MUFG Bank suggests potential further weakening for the dollar if market participants increase their bets on a Federal Reserve rate cut in July. Current market probabilities, according to LSEG, assign a 21% chance to such a scenario, indicating a degree of uncertainty regarding near-term monetary policy adjustments.
Gold’s Retreat from Highs
Gold experienced a sharp downturn, falling 1.8% to settle at 3,286.80 dollars per ounce. This decline occurred despite the dollar’s weakness, primarily driven by a reduced appetite for hedging among investors. The precious metal was pressured by a diminished perception of geopolitical risk and anticipation of progress in President Trump’s commercial policy initiatives.
Technical indicators for gold, according to Trade Nation, shifted from overbought levels to neutral, exhibiting increased bearish momentum during Asian and European trading sessions. Analysts indicate that a failure for gold to consolidate its current price could see its next significant technical floor near 3,200 dollars, a level not observed since the beginning of the second quarter.
Oil Market Consolidation Amid Geopolitical Shifts
In the energy markets, West Texas Intermediate (WTI) crude saw a modest gain of 0.4%, closing at 65.52 dollars per barrel, while Brent crude advanced slightly by 0.1% to 67.77 dollars. Despite these daily upticks, both contracts registered substantial weekly losses, with WTI dropping 11% and Brent falling 12%. This significant weekly correction is largely attributed to the partial removal of geopolitical risk premium following the Israel-Iran ceasefire.
BOK Financial observes that the oil market is entering a phase of consolidation. Support for prices comes from tighter inventories in the United States and the onset of the summer driving season, typically a period of higher demand. However, this is counterbalanced by increasing supply from OPEC, which continues to exert downward pressure. The recent daily rebound has not offset the earlier declines, leaving crude prices near levels seen before the escalation of the Middle East conflict during the second quarter of the year.
Michael Zhang is a seasoned finance journalist with a background in macroeconomic analysis and stock market reporting. He breaks down economic data into easy-to-understand insights that help you navigate today’s financial landscape.